UK unemployment rises while pay growth slows
UK unemployment has increased slightly, according to the latest official data, while wage growth continues to slow down. The unemployment rate for the three months leading to September stood at 4.3%, up from 4% in the previous quarter. However, the Office for National Statistics (ONS) urged caution in interpreting these figures due to concerns about the reliability of its data collection methods.
Wage growth, although easing, is still outpacing inflation. Excluding bonuses, average pay increased by 4.8% year-on-year between July and September, the slowest pace in more than two years. Additionally, the number of job vacancies continued to decline, a trend that has been ongoing for over two years.
Liz McKeown, director of economic statistics at the ONS, pointed out that despite the slowdown, employment remains slightly above pre-pandemic levels. In an interview with the BBC’s Today programme, she acknowledged a “continued easing of the labour market,” but also highlighted concerns about the reliability of the data, noting a smaller-than-usual sample size for the ONS Labour Force Survey over the past year.
The ONS figures come amid concerns that businesses, already grappling with rising costs, have paused hiring decisions in anticipation of the government’s upcoming budget measures. Supermarkets like Asda and Sainsbury’s, along with High Street retailer Marks & Spencer, have expressed concern over rising costs due to hikes in National Insurance contributions (NICs) and minimum wage increases set for April, as outlined in Chancellor Rachel Reeves’ first budget. These tax increases are raising fears among businesses that they may need to scale back hiring, freeze wage increases, or raise prices to offset the added costs.
The government’s plans to increase public sector pay will likely impact future data, but economists warn that the rise in employers’ NICs may create additional financial pressure, particularly in the private sector. Alexandra Hall-Chen, a principal policy adviser at the Institute of Directors, argued that the combined effect of these policy changes could negatively affect hiring intentions, urging the government to address the increased risks and costs that businesses face when employing staff.
Small business owners, like Wendy Jones-Blackett from Chapel Allerton, Leeds, expressed concerns over the impact of these changes. Jones-Blackett, who operates a small greeting card business, explained that while her business employs seven people, the companies it sub-contracts for printing and storage will face higher costs. This, in turn, will influence decisions on pay rises, as rising expenses may limit their ability to reward employees.
Meanwhile, a recent survey by the Recruitment and Employment Confederation and KPMG showed that vacancies had fallen for the 12th consecutive month, further suggesting weakening demand for workers. Rob Wood, chief UK economist at Pantheon Macroeconomics, said that despite the ONS’s smaller data sample, the Bank of England would likely focus on broader trends in the labor market. He noted that while unemployment is gradually rising and the labor market is loosening, it remains tight, with wage growth still high enough to prevent inflation from reaching the Bank’s target. Economists have largely ruled out the possibility of another rate cut by the Bank of England in December based on the latest employment data. Work and Pensions Secretary Liz Kendall also commented that more needs to be done to improve living standards, with a planned increase to the National Living Wage for the lowest-paid workers, which will benefit about three million people starting in April.
